Dec. 1 (Bloomberg) -- The European Union imposed five-year tariffs on citric acid from China to shield Jungbunzlauer AG and Royal DSM NV from cheaper imports in the EU’s 350 million-euro ($442 million) market.

The duties as high as 42.7 percent punish Chinese exporters for selling the soft-drink flavoring in Europe below cost, a practice known as dumping. An Austrian unit of Switzerland’s Jungbunzlauer and a Belgian subsidiary of Netherlands-based DSM are the EU’s only producers of citric acid, which is also used as a food preservative and an agent in pharmaceuticals and detergents.

The Austrian and Belgian businesses suffered “material injury” as a result of EU imports from China, the 27-nation bloc said in a decision today in Brussels. The five-year duties follow provisional levies introduced six months ago and will take effect after publication in the Official Journal by Dec. 3.

The EU is trying to curb imports of Chinese goods ranging from frozen strawberries to ironing boards. China, the world’s most populous country, faces EU anti-dumping duties on about 40 products -- more than any other nation.

Chinese citric-acid exporters expanded their share of the EU market to 46 percent in the 12 months through June 2007 from 39 percent in 2004, the European Commission, the EU’s regulatory arm, said when imposing the provisional duties in June. The other main source of EU citric-acid imports is Israel, whose share of the European market fell to 3 percent from 5 percent over the same period, according to the commission.

‘Substantial’ Imports

The EU dismissed the risk that the five-year trade protection would cause a supply shortage for users, saying imports from China remained “substantial” after the provisional measures were introduced and European production is set to expand.

In July, Jungbunzlauer announced a plan to expand capacity and output at its Austrian citric-acid plant. The following month, DSM said it would close its Chinese citric-acid plant and focus on production at the Belgian site.

The EU trade protection follows an investigation resulting from a dumping complaint last year by European chemical industry lobby group Cefic on behalf of Jungbunzlauer.

The provisional duties were as much as 49.3 percent and the EU will refund importers the difference with the lower five-year levies. In addition, the EU will exempt six Chinese exporters because they made acceptable minimum-price pledges.

Under EU practices, the commission can introduce provisional anti-dumping duties for six months and the bloc’s national governments -- acting on a commission proposal -- can turn those measures into “definitive” five-year levies at the same or different rates.

By Jonathan Stearns

To contact the reporter on this story: Jonathan Stearns in Brussels at jstearns2@bloomberg.net

Last Updated: December 1, 2008 08:09 EST

Source: www.bloomberg.com